Home decor retailer Old Time Pottery announced Monday morning that it has started chapter 11 bankruptcy proceedings in order to restructure its finances, the Murfreesboro (Tenn.) Daily News Journal reported. Based in Murfreesboro, Tenn., the company said that the move was due to the COVID-19 pandemic. "Prior to COVID-19, Old Time Pottery was growing profitability at a near-record pace. When COVID-19 hit in March 2020, the company experienced a sudden and precipitous decline in sales that lasted for six weeks with mandates to close numerous store locations in accordance with state and local government regulations," according to a company news release. As part of the chapter 11 effort, Old Time Pottery will close stores in Fayetteville, N.C., North Charleston, S.C., Rockford, Ill., and Orlando. No reductions in staffing or other closures are expected at other stores, distribution centers or store support centers, the release said. Old Time Pottery operates 43 stores in 11 states, according to its website.
Twelve midsize to large corporations — all with more than $10 million in debt — filed for chapter 11 protection during the third week of June, another consequence of the coronavirus pandemic and continued trouble in America’s oil industry. The filings represent the highest weekly total of the year, and experts believe this is just the beginning of a bankruptcy tsunami that will wash over the country’s largest companies this summer and then drench both smaller businesses and individuals if government stimulus money dries up, USA Today reported. “I very much expect to see the numbers continue to rise” said Ed Flynn, a consultant for the American Bankruptcy Institute, a nonpartisan research organization. The types of companies affected are unsurprising. Since the start of the pandemic, they have included businesses that consumers have studiously avoided, from rental car companies, restaurants and department stores to gyms and health care companies offering elective surgeries and procedures. At least 24 oil and gas companies filed from April through June — nearly twice as many as during the first three months of the year, according to Haynes and Boone LLP, an international law firm based in Texas. Four of those companies — Texas-based NorthEast Gas Generation, Colorado-based Extraction Oil & Gas, and Chisolm Oil and Gas and Chesapeake Energy, which are both from Oklahoma — filed in the last two weeks of June. “This trend should continue through the remainder of 2020 and into 2021,” said Charles Beckham, a partner in Haynes and Boone's restructuring practice. “Unless commodity prices have a majestic increase, many producers will seek relief in bankruptcy court with the hope that will bring them back to a rational place where they can continue to produce and service their debt.” Melissa Kibler, senior managing director in the Chicago office of Mackinac Partners — a turnaround and restructuring firm — also believes the U.S. economy is at a turning point and bankruptcy courts will play a major role in determining the way forward. “Any time you have a significant disruption like this it’s going to create winners and losers and systemic change,” Kibler said. “We have industries that are evolving, and on top of that we have overlaid the COVID pandemic and that has forced a lot of changes.” Read more.
NPC International Inc., one of the largest restaurant franchisees in the U.S., is preparing to file for bankruptcy protection despite its brands reporting a bump in sales since the coronavirus pandemic, the Wall Street Journal reported. The owner of more than 1,200 Pizza Hut restaurants and 385 Wendy’s Co. stores could file for chapter 11 protection as soon as today. The franchisee missed interest payments on its nearly $800 million in loans on Jan. 31, prompting S&P Global Ratings and Moody’s Investors Service to lower their views on the company’s debt. NPC was in conversations with its lenders for a possible bankruptcy filing at that time.
Rite Aid Corp. is asking some of its creditors for a few more years of patience while it tries to turn around the struggling drugstore chain, Bloomberg News reported. Bondholders are being asked to swap $750 million of Rite Aid’s unsecured 2023 notes for securities that wouldn’t be paid back for three more years, according to a statement. They’d also have to accept a haircut on their holdings. In return, the new notes would be secured by Rite Aid’s assets and pay a higher interest rate. The debt swap was disclosed as part of a first-quarter earnings release that included a net loss from continuing operations of $72.7 million. Rite Aid withdrew its forecasts, citing effects of the coronavirus pandemic on its business. The proposed swap would exchange the unsecured 2023 notes that pay interest of 6.125 percent for secured notes that come due in 2026 and pay 8 percent. Participating bondholders would receive $800 in new notes and $194 in cash for every $1,000 of face value if they tender early. Rite Aid, based in Camp Hill, Pennsylvania, is also asking bondholders for permission to create more secured debt.
Macy’s is eliminating about a quarter of its corporate workforce, slashing 3,900 white-collar jobs in a sweeping effort to cut costs during the coronavirus pandemic, the Washington Post reported. The layoffs announced yesterday come just months after the beleaguered retailer announced it would close 125 stores — about a fifth of its total — and shed 2,000 positions after a disappointing holiday season. The company also is scaling back staffing at its Macy’s and Bloomingdale’s stores, distribution facilities and customer service centers, but says that it will “adjust as sales recover.” The department store chain projected the moves would save it $630 million a year. The pandemic “has significantly impacted our business,” chief executive Jeff Gennette said in a statement. “While the reopening of our stores is going well, we do anticipate a gradual recovery of business. … We know that we will be a smaller company for the foreseeable future.”
Restaurant chain Chuck E. Cheese parent CEC Entertainment filed for chapter 11 protection today, making it the latest corporate casualty of the COVID-19 pandemic, Reuters reported. The company described the current crisis as the “most challenging” in its history and said it would use the bankruptcy proceedings to continue talks with stakeholders and landlords, as well as restructure its balance sheet. CEC listed both assets and liabilities in the range of $1 billion to $10 billion, according to the bankruptcy filing in the U.S. Bankruptcy Court for the Southern District of Texas. U.S. and international franchise partners as well as corporate entities outside the United States are not part of the process, it said. Chuck E. Cheese and Peter Piper Pizza locations will continue to re-open as per government guidelines, CEC added. As of yesterday, 266 Chuck E. Cheese and Peter Piper Pizza restaurant and arcade venues were re-opened, with the company expecting to maintain ongoing operations in the locations throughout the chapter 11 process. Irving, Texas-based CEC was taken private by Apollo Global Management in 2014 in a $1.3 billion deal, including debt.
Checkers Drive-In Restaurants Inc. is turning to financial advisers to navigate the coronavirus pandemic’s impact on a business model that was already deteriorating, the Wall Street Journal reported. The burger chain, owned by private-equity firm Oak Hill Capital Partners, hired investment bank Miller Buckfire & Co. and turnaround adviser Mackinac Partners to explore a potential restructuring. The company, which operates restaurants under the Checkers and Rally’s brand names, was a bright spot among chain restaurants when Oak Hill bought it in 2017, with same-store sale growth of over 3 percent. Its main selling point: inexpensive yet indulgent burgers like the “Big Buford” and the “Roadhouse Baconzilla.” Checkers has close to $300 million in debt stemming from the buyout. Most of the company’s nearly 900 locations are franchised. The Checkers division had 584 U.S. locations last year, 79 percent which were franchised, according to food-service industry research firm Technomic Inc. Last year, Oak Hill injected $25 million into the company, while lenders temporarily suspended interest payments on close to $90 million in loans, according to Moody’s Corp.
The coronavirus recession is pushing many companies into bankruptcy, a painful process that has led to layoffs, wiped out some investors and hurt the economy. But the chief executives of some of these businesses are doing just fine, according to a New York Times analysis. Companies that are struggling to pay creditors and suppliers are managing to find millions of dollars to pay bonuses to their bosses. The payments, which are made just before a bankruptcy filing, appear to be legal and have been made by several companies. J.C. Penney, which is closing 154 stores, paid its chief executive, Jill Soltau, $4.5 million. The chief executive of Whiting Petroleum, which sought bankruptcy protection in April, received $6.4 million, and Chesapeake Energy is paying bonuses ahead of an expected bankruptcy filing. Executives at Hertz also got payments before the rental-car giant sought bankruptcy protection. Companies have said that the payments are meant to help them retain qualified executives through the recession and bankruptcy. This is not the first time that executive pay at troubled companies has prompted an outcry. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 aimed to curb retention bonuses paid during bankruptcy. Under the law, companies are allowed to pay incentive-based bonuses, but the legal cost of constructing such payments and getting them approved in bankruptcy court soared after 2005, according to research by Jared Ellias, a professor at the University of California’s Hastings College of the Law. Of course, Congress could change bankruptcy law so that compensation payments made before the filing could be clawed back, Ellias said. In addition, lawmakers could make it easier for creditors to pursue claims against executives after the bankruptcy. Read more.
In related news, Ascena Retail Group Inc., the distressed parent company of Ann Taylor and Lane Bryant, plans to pay about $5.5 million in cash retention and incentive awards to three executives, becoming the latest struggling company to hand out bonuses to top management, the Wall Street Journal reported. The incentives come after Ascena warned last month that it was evaluating all options as the coronavirus pandemic has significantly disrupted its business, resulting in reduced earnings and cash flow, as well as higher levels of debt and deferred liabilities. The company disclosed Monday it has agreed to pay nearly $2.14 million in bonuses to Chief Executive Gary Muto and to Carrie Teffner, interim executive chair of the board. Executive Vice President and Chief Financial Officer Dan Lamadrid will get about $1.21 million, according to a regulatory filing. The CEO will also receive more than $1 million in performance-based payments for fiscal 2018 and fiscal 2019. The finance chief will receive $83,650 for those two years, the filing shows. Read more.
GNC Holdings Inc. filed for bankruptcy protection with the aim of selling itself and closing stores after its latest effort to manage its debt load unraveled amid the coronavirus pandemic, Bloomberg News reported. The health and wellness company’s chapter 11 petition filed in U.S. Bankruptcy Court in Delaware allows the retailer to keep operating while it pursues a dual-track process to restructure its balance sheet in a standalone plan or complete a sale, according to a statement. GNC entered into the process with support from a majority of its secured lenders and an affiliate of its largest shareholder, Harbin Pharmaceutical Group Holding Co., the Pittsburgh-based company said in the statement. The agreement also includes its largest vendor and joint venture partner, IVC. Certain lenders also provided $130 million in additional liquidity to financially support the company through its proposed restructuring. The company’s pre-negotiated plan will shutter stores as it looks to emerge leaner. It also reached an agreement in principle to market and sell itself through a court-supervised process, with an initial bidding price of $760 million, subject to court approval. A higher bid could be presented and accepted, and would be implemented instead of just the standalone plan transaction, according to the statement. With the support of its lenders and stakeholders, GNC expects to confirm a standalone plan of reorganization or complete a sale that will allow the business to exit from its restructuring process by the fall. GNC’s U.S. and international franchise partners and its corporate operations in Ireland, which are separate legal entities, aren’t part of the bankruptcy.
